Monday, April 11, 2016
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Arbitrator Rejects Dunn Claims, Grants Leave to Amend
By KENNETH OFGANG, Staff Writer
An arbitrator Friday rejected all of former Executive Director Joseph L. Dunn’s claims against the State Bar, but granted leave to amend as to most of the allegations.
Arbitrator Edward L. Infante said Dunn’s allegations that the State Bar terminated him in violation of the Labor Code whistleblower provision, and that it breached fiduciary duties and the covenant of good faith and fair dealing implied in his employment contract, were deficient but could potentially be cured by amendment. Dunn was given until May 1 to file and serve an amended notice of claims.
The arbitrator also allowed Dunn to amend a claim that former State Bar President Craig Holden and Beth J. Jay, former principal attorney to Chief Justice Tani Cantil-Sakauye, intentionally interfered with his contractual relationship with the organization in several respects. But he dismissed breach-of- fiduciary-duty claims against Holden and the Board of Trustees outright, saying they owed Dunn no such duties.
Dunn, a former trial lawyer, state senator, and chief executive of the California Medical Association, was the State Bar’s top administrator from September 2010 to November 2014, when the organization announced it had exercised a clause in his contract giving it the right to end his employment on 30 days’ notice.
He is currently a Democratic candidate for the Orange County-based U.S. House seat that Rep. Loretta Sanchez is giving up to run for the U.S. Senate.
Retaliation Suit
Dunn sued almost immediately, claiming that he was fired in retaliation for complaints about various improprieties at the State Bar, including the falsification of statistics purporting to show that a backlog in disciplinary complaints had been cleared up, as well as wasteful spending and an alleged conflict of interest on the part of Munger Tolles & Olsen, the law firm hired to investigate an internal complaint brought against Dunn by Chief Trial Counsel Jayne Kim.
He has also claimed that hiring Munger Tolles was a waste of funds because retired state Supreme Court Justice Edward Panelli was willing to conduct the probe pro bono.
Dunn alleged that Kim had brought the claim in retaliation for his identifying her as the person responsible for falsifying the backlog statistics.
A Los Angeles Superior Court judge ruled last year that the contract required Dunn to take his claims to arbitration, leading to the selection of Infante, a retired magistrate judge in the U.S. District Court for the Northern District of California, to hear the case.
Friday’s Ruling
In his ruling Friday, Infante said Dunn had not pled a whistleblower claim under Labor Code §1102.5, even though he had, in his opposition to the State Bar’s demurrer, identified four statutes that the State Bar may have violated.
This was insufficient, Infante explained, because the statutes were not identified in Dunn’s initial pleading, and because “it is not enough for Claimant to argue…that the reported activities might have violated a statute.” Dunn, he said, must allege “that at the time he reported the wrongful activity, he had reasonable cause to believe that the wrongdoing violated a particular statute, rule, or regulation.”
Dunn also inadequately pled his claim that the State Bar breached fiduciary duties by leaking portions of the Munger Tolles report to the press, and by inadequately investigating the leak, Infante said.
The arbitrator concluded that the employment relationship did not create any fiduciary duty as a matter of law, so the only theory on which Dunn could plead the claim was that the State Bar breached a duty owed to him as an ordinary member. To do so, Infante said, he would have to allege the existence of such a duty, that a breach of the duty harmed him “as a member of the association,” and that he has a right to a particular form of relief.
As for the bad-faith termination claim, Infante held that Dunn was an at-will employee, and could not recover without alleging that his firing was a pretext to deny him some contractual benefit beyond continued employment. He also held that Holden, who was also sued on the claim, was entitled to dismissal without leave to amend because he was not a party to the contract.
Tortious Interference Claim
As for the tortious interference claim against Holden and Jay, Infante said Dunn’s allegations that they participated in the hiring of Munger Tolles with the intent to bring about Dunn’s firing, misrepresented the views of the chief justice with regard to Dunn’s continued service, and provided “false information concerning” Dunn’s “employment status” to the Board of Trustees, were inadequate.
Holden, he said, cannot be held liable for interfering with a contract to which the State Bar was a party, unless he acted in some capacity other than that of State Bar president. Nor can he be held liable for discretionary acts, due to sovereign immunity, Infante reasoned.
Dunn’s allegations against Jay, he said, were “vague and ill defined” and based, at least in part, on communications protected by the litigation privilege.
Dunn’s attorney, Mark Geragos, said the arbitrator’s ruling “won’t delay the inevitable” and that the defendants “will be held accountable.”
State Bar officials said in a statement that “[i]f Dunn chooses to amend his complaint, the bar will again challenge it.”
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